ashford BUS401 week 1-4 quiz and practice questions

Grade Details
1. Question : The income statement for Brit, Inc. Indicates that tax
expense was $20,000. The balance sheet indicates that taxes payable for the
same year increased by $ 5,000. What amount did Brit, Inc. actually pay in
taxes during this year?

$ 15,000

$ 20,000

$ 25,000

Cannot be determined without the cash balance

2. Question : A financial manager is considering two projects, A and B.
A is expected to add $ 2 million to profits this year while B is expected to
add $ 1 million to profits this year. Which of the following statements is most
correct?

The manager should select project A because
it maximizes profit.

The manager should select the project that
maximizes long-term profits, not just one year of profits.
The manager should select project A or he is
irrational.

The manager should select the project that
causes the stock price to increase the most, which could be A or B.

3. Question : Which of the following statements about depreciation is
true?

Depreciation is a noncash expense, but it is
important because it affects a corporation’s tax liability.
Depreciation must be calculated the same way
for financial reporting and tax purposes.

The choice of depreciation method had no
impact on a firm’s value because the same amount of depreciation is taken over
the life of an asset regardless of the method used.
A shareholder wealth maximizing corporation
prefers to defer depreciation expense in order to increase current reported
profits.

4. Question : The principle of risk-return tradeoff means that _____

Higher risk investments must earn higher
returns.

An investor who takes more risk will earn a
higher return

A rational investor will only take on a
higher risk if he expects a higher return.

An investor who bought stock in a small
corporation five years ago has more money than an investor who bought U.S.
Treasury bonds five years ago.

5. Question : The quick ratio of a firm would be increased by which of
the following?

$20,000 short term bank loan is used to pay
current accounts payable?

Equipment is purchased, financed by long term
debt issue

Inventories are sold for cash

Inventories are sold in exchange for a long
term note.

6. Question : Common sized income statements ___________

Assist in the comparison of companies of
different sizes

Show each income statement account as a
percentage of total assets

Compare companies with the same level of
total sales

Compare companies with the same level of net
income

7. Question : The December 31, 2007 balance sheet shows net fixed assets
of $100,000 and the December 31, 2008 balance sheet shows net fixed assets of
$140,000. Depreciation expense for 2007 is $15,000 and depreciation expense for
2008 is $20,000. Based on the information, the cost of fixed assets purchased
during 2008 is ________

$ 60,000

$ 20,000

$ 40,000

$ 75,000

8. Question : Project A is expected to generate positive cash flow of $
1 million in 10 years while Project B is expected to generate $ 500,000 in 5
years. Therefore, _______

Project A is preferred because shareholder
value is based on cash flow.

Project B is preferred because its cash flow
is expected to be received sooner than the cash flow from Project A.
Both projects have equal value because they
average $100,000 per year.

Project B may be preferred to Project A if
the opportunity cost of money is high enough.

9. Question : Global.Com has cash of $75,000; short term notes payable
of $100,000; accounts receivable of $275,000; accounts payable of $135,000;
inventories of $350,000; and accrued expenses of $75,000. What is Global’s net
working capital?

$ 390,000

$ 175,000

$ 700,000

$ 210,000

10. Question : Which of the following statements is an example of a
futures market transaction?

An investor purchases 100 shares of IBM
hoping to sell it in two years for a profit.

A company purchases an option to buy 1,000 barrels
of oil anytime between now and the end of the year.
A company agrees to purchase 1,000 barrels of
oil for delivery in six months at a price of $ 70 per barrel.
An executive has a portion of his current
year salary deferred until he retires.